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Our ranking measures six vital categories for businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. We factor in 37 points of data to determine the ranks in the six main areas. Business costs, which include labor, energy and taxes, are weighted the most heavily. We relied on 11 data sources, with research firm Moody’s Analytics as the most-utilized resource (click here for a detailed methodology).

Virginia ranks No. 2 for the second straight year after a four year run ranked first. Virginia has a strong, educated labor force and a pro-business regulatory climate. The only thing keeping it from the top spot is its outlook.

Virginia has been a major beneficiary of the federal government's largesse in terms of military spending and infrastructure development in northern Virginia. Those days may be coming to end according to Zandi who says, "As the fiscal screws tighten, it is going to be more difficult for Virginia to maintain the growth rates and success it has had in the past."

Louisiana was a big climber on the list as it ranked No. 30, up from No. 44 last year. Louisiana has made great strides since Hurricanes Katrina and Rita hit in 2005 and the state’s population fell nearly 300,000 people. Household incomes are up 5.2% annually since then which is tops in the nation.

Louisiana’s business friendly climate is helped by a low union workforce which at 5.5% of employment is fourth lowest in the U.S. Louisiana ranks second in an annual study on tax incentives and economic development conducted by Pollina Corporate Real Estate.“Louisiana has made strong efforts to adjust to the needs of businesses,” says Brent Pollina, who authored the study.

The worst states for business continue to be dominated by those in the northeast including: New Jersey (No. 44), Vermont (No. 45), Rhode Island (No. 48) and Maine which lands at No. 50 for a second straight year. Maine suffers from energy costs 31% above the national average, stagnant population growth and anemic forecasts when it comes to job and gross state product growth.

One bright spot in the northeast is No. 18 Massachusetts thanks to the dynamic Boston economy which is strong in growth industries like healthcare, education and technology. Business and living costs are among the highest in the country, but the state ranks first overall in quality of life and has one of the most educated labor forces in the U.S.